03 Jun 2021

Greening the European Green Bond market

Apostolos Thomadakis

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Europe’s challenge to cut carbon emissions by at least 55% by 2030 will require an estimated €330 billion of energy-related investments (e.g. renewable energy, energy efficient buildings, zero carbon transportation). Green bond markets have the potential to contribute to this ambitious target. Despite the expansion in green bonds over the past six years (an average year-on-year growth of about 50%), green bonds represent only a tiny part of the overall bond market at 1-2%.

More is needed to further develop this market; most importantly – a clear definition of what constitutes green is also needed. The European Commission has tried to address this with the introduction of the Taxonomy. Also necessary is a framework for external reviewers that provide assurance to investors regarding the environmental credentials of green bonds and green bond issuers.

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